A Significant Number of Mortgage Loans Use Adjustable Interest Rates

question 23

Multiple Choice

A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the:

• A) one-year U.S. Treasury constant maturity rate
• B) prime rate
• C) London Interbank Offered Rate (LIBOR)
• D) cost-of-funds index

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Definitions:

Productivity Rises

An increase in the efficiency of production, often leading to more output with the same or fewer inputs.

Relative Prices

The price of a commodity or service in comparison to another, indicating its opportunity cost and economic choice.

Substitutable Resources

Resources that can replace each other in production or consumption, leading to flexibility and alternatives for consumers and producers.

Rent

The payment made by a tenant to a landlord for the use of a property or space.